The results also suggest that the company has taken action to address falling recyclate prices through the optimisation of the quality of recycled material it handles.
Overall the company’s profit before tax is reported to have increased by 10%, jumping from around £27.7 million in 2014/15 to £30.7 million in 2015/16. This comes despite an overall fall in revenue, from £835.9 million to £806.2 million, which is likely to have been offset by a reduction in capital investment.
The Taunton-based waste management company’s parent group Pennon, which published the full year financial results this morning, claimed that Viridor’s growth forecasts remain on course, with eight of its 11 committed energy from waste facilities now in operation.
During the year, Viridor saw a huge increase in earnings from its energy recovery business, which rocketed from £33.7 million in 2014/15 to £89.7 million in 2015/16. The company notes that during the year operations at its six most recently delivered ERFs continued to ramp up, while its Peterborough ERF also became operational in December 2015.
Viridor has three further ERFs under construction with its Glasgow facility expected to enter in the first half of 2016/17, and it was also noted that construction is ‘progressing well’ at its Dunbar and Beddington sites.
Landfill
This offset a fall in earnings from its landfill and landfill gas businesses, which fell 59% to £6.3 million and 12% to £31.5 million respectively.
Pennon also claims that recyclate prices had dipped compared to the preceding 12 months – with average revenues reported at £85 per tonne (including recyclate sales and gate fees) – despite volumes of recyclable materials traded increasing by 121,000 tonnes to 1.8 million tonnes across the year.
“Where new recycling contracts have been secured, better gate fees reflect the sharing of recyclate price risks with customers and secure a better specified quality of inputs. These self-help measures have resulted in marginal increases in gate fees compared to the prior year.”
Pennon Group
And, Pennon notes that although prices for material have stabilised ‘to some degree’, most commodities remain under pressure.
As a result of these concerns the company has carried out an ‘Input, Throughput and Output Optimisation (ITOO)’ programme – aimed at targeting improvements in the quality of material received through its recycling contracts and tightening quality control over output material.
‘Optimisation’
In February, it was announced that Viridor would be consolidating some of its recycling sites in a bid to make ‘more effective’ use of its assets (see letsrecycle.com). The business has also seen some personnel changes, with some senior staff departing (see letsrecycle.com story).
In its results this morning, the company stated: “A number of input contracts have been successfully renegotiated enhancing value and quality of inputs. Where new recycling contracts have been secured, better gate fees reflect the sharing of recyclate price risks with customers and secure a better specified quality of inputs. These self-help measures have resulted in marginal increases in gate fees compared to the prior year.”
Action to address quality, and the overall increase in material handled have seen the earnings from Viridor’s recycling operations increase from £11.5 million to £13.1 million in 2015/16.
Revenue
Overall, Pennon Group, which also owns utilities company South West Water saw its group revenue fall slightly to £1.352 billion in 2015/16.
Commenting on the results, Chris Loughlin, Pennon Group chief executive, said: “2015/16 has been a transformative year for Pennon. The Group has delivered a strong performance, notwithstanding the financial impact of our commitment to keep South West Water customer bills below inflation to 2020.
“We have seen significant earnings growth driven by the build-out of Energy Recovery Facilities across the UK. Bournemouth Water has now been integrated into South West Water and the combined water business is outperforming its regulatory contract. This strong performance across the Group underpins our sector-leading dividend policy of 4% growth per annum above RPI inflation to 2020.”
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